Three weeks ago, James Kossin published a major study in the scientific journal Nature: “Hurricane intensification along United States coast suppressed during active hurricane periods” (http://www.nature.com/nature/journal/v541/n7637/full/nature20783.html). This paper has gotten a bit of press in various insurer publications as over the last decade near term hurricane risk has dramatically influenced the insurance industry in hurricane-prone states. In short, Kossin’s paper provides valuable insight into rapid hurricane intensification during active and inactive periods of hurricane activity in the Atlantic basin (known as the warm and cold phase of the Atlantic Multi-Decadal Oscillation [AMO]). The findings suggest that approaching hurricanes are more likely to intensify before landfall during colder phases of the AMO and are more likely to weaken before landfall during warmer phases. Suggesting that during times when the sea surface temperatures are anomalously warm in the main development region, regions along the U.S. coast experience higher then normal vertical wind shear. Furthermore, the local sea surface temperatures are substantially cooler than the main development region which tend to inhibit intensification and form a “protective barrier” along the United States coastline during this period.

My very first thought as I read about this “protective barrier” was, finally, someone has scientifically proven the existence of HAARP and electromagnetic capabilities of the ionosphere that conspiracy theories suggest can also be used in weather modification and more. (i.e., a “protective barrier” created to control the weather (hurricane landfall))! (If you’re unfamiliar with the HAARP conspiracy theories that abound, then you won’t get this reference, but it’s one of the top questions meteorologists get asked, and you can learn more at http://www.nbcnews.com/science/weird-science/conspiracy-theories-abound-u-s-military-closes-haarp-n112576.)

How the Science has Changed

In all seriousness, to truly understand the impact of Kossin’s paper, it’s important to review how our understanding of active and inactive phases of the Atlantic Ocean has evolved and influenced the insurance industry. Since the 1960’s, the late Dr. Gray showed distinctly differing environmental conditions for tropical cyclone development. But not until the marked increase beginning in 1995 did insurers begin to notice what drives this activity. After the costly 2004 and 2005 hurricane seasons, a dozen and half papers highlighted a link to increased hurricane activity due to a warming world and/or the current phase of the AMO. About the same time, catastrophe modeling companies were being pressured to adjust for this increased frequency and severity that had impacted the insurance industry since 1995. Modeling companies incorporated a range of statistical analyses, and in some cases expert elicitation, to make assessment on future hurricane landfalling risk.

Mother Nature, however, does not always follow weather trends; and since 2005, the U.S. has entered what some have called a “U.S. landfall hurricane drought.” While overall named storm activity remains elevated across the Atlantic basin with some very active years since 2005 (2010, for example), many hurricanes have not made landfall as expected, which is actually influencing the long term landfall rates across the U.S. A few recent research papers suggest that scientists never settled on the exact impact the warmer phase of the AMO might have had on U.S. landfalls. Some of these papers suggest that in a warmer world, African dust and/or North Atlantic sea surface temperatures could actually encourage hurricanes to form further east or recurve before impacting North America, resulting in a lower U.S. hurricane landfall rate.

But Kossin’s paper provides new evidence that the science is not settled, and there is a lot to learn about hurricanes and the rate at which they make landfall. In general, the correlation between the number of hurricanes that develop in the Atlantic basin and number of hurricanes that make landfall is weak. This new study in Nature could explain part of this relationship as it highlights that elevated wind shear (changing wind speeds with height) and cooler sea-surface temperatures along the U.S. coast during the warm active phase of the AMO create conditions that tend to weaken hurricanes as they approach the U.S. coast. Conversely, the cool phase of the AMO makes approaching hurricanes more likely to intensify. This might conflict with ideas that some scientists suggested prior to 2004 and 2005, that the warmer phase of the AMO was correlated to more landfalls and possibly stronger landfalling storms (and fewer landfalls during the cooler phase of the AMO).

The Hurricane “Drought” can be Explained

Kossin suggests in his paper’s closing that this new research could possibly explain the recent “drought” of major hurricane landfalls. However, in late 2015 another research paper funded by Risk Prediction Initiative (“The Arbitrary Definition of the current Atlantic Major Hurricane Landfall Drought”) suggested the major hurricane drought is more a function of the definition of a major hurricane (defined as a Category 3 or higher on the Saffir-Simpson Scale) and the uncertainty in wind estimates. As an example, Ike (2008) made landfall as a high-end Category 2, but could just as easily have been classified as a low-end Category 3 at landfall. For contrast, consider a storm like Sandy (2012), which was not even classified as a hurricane at landfall, but still resulted in large wind and storm surge insurance losses.

Image created by Roger Pielke Jr. who has been keeping track of the days between major hurricane landfalls.

It’s important to remember that only 78 major hurricanes have made landfall since 1900 (117 years), which results in a particularly small sample size, and that there are likely many other factors that affect intensification before landfall. Hurricanes can experience higher levels of disruptive wind shear while turning north, which could be due to a large scale trough of low pressure or drawing in dry air from landmasses. Hurricanes can also send large waves and surge ahead of the storm causing warm water to mix with cooler water and deplete important energy from the storm as it approaches land. These vacillating factors highlight the complex interactions hurricanes may experience during a life cycle. These factors could also explain why many hurricanes have not intensified prior to U.S. landfall (with the exception of Charley [2004] and Humberto [2007]).

Future Hurricane Landfall Rate Models

As always, new research will continue to become available and catastrophe modeling companies will continue to judge how the science best fits into catastrophe models. This new research should not discredit near term view modeling work. Hindsight is 20/20, and as Hall, T.M., and K. Hereid, 2015: The frequency and duration of U.S. hurricane droughts paper suggests several observations point to the current drought being more a case of good luck than any shift in hurricane climate. Therefore this luck could have swayed higher then normal insured losses in a completely different direction over the last 10 years. These facts highlight why it is important to continuously evaluate new science. Modeling companies need to ensure they avoid knee-jerk reactions to industry demands or speculative science. Seasonal hurricane forecasts are improving, and with time, multidecadal sea surface patterns and other variables could help clarify the cause of reduced landfall rates, not just in the Atlantic basin, but in other basins near high exposure. El Niño/Southern Oscillation (“ENSO”) and other variables could also be worked into the landfall rate catalogs produced by model vendors.

As pointed out in this blog, the science might not be settled on hurricane landfall rates and what drives these rates during particular climatic conditions. Although it is short by climate standards, the U.S. landfall hurricane record is one of the best natural catastrophe databases insurers have to understand frequency and severity. There is a reason why catastrophe model companies calibrate their models to the longest period of record available.

There is plenty of room for debate about near term hurricane landfall rate models, the drivers of this risk, and what position an insurer should take regarding rate models. Are they a good idea or a bad idea? Should a blended approach be used? Those are interesting questions and a worthy topic, which is why I will be moderating the session, “Is Near Term vs. Long Term View of Hurricane Risk Over?” at the February RAA Cat Management Conference. We hope this subject generates lively discussion and hope to see you there!

As 2016 natural catastrophe headlines funnel in from various media outlets and insurance publications, a theme of negative highlights quickly emerges. Few headlines point out the positives that occurred. In this post, I want to highlight a few of the 2016 insurance industry positives that might otherwise be lost in the sea of negative news as it relates to natural catastrophes.

Severe Weather
When the calendar flipped to 2017, a switch seemed to turned on for US severe weather season: severe weather impacted the Gulf Coast states with 31 tornadoes on January 2 (PCS 1711). Just two weeks into the year, 2017 already has 4.4 times more than the normal number of tornadoes. However, the great news is that 2016 ended with lower reported tornado numbers, and the preliminary numbers suggest that 2016 ended up as a year with the fewest tornadoes since 1954 (when records started).

NOAA plot of the annual running total of tornado reports compared to inflation adjusted values.

This might not seem remarkable given the US has experienced five years a row of below near term normal tornado reports (2005 – present year) since the near record high year of 2011. So the good news is the US continues to see lower tornado counts for several years in a row now and is currently in what some scientist call a “tornado drought.” The other good news is that, as a matter of luck, the tornadoes that did occur did not result in large insured loss events. There were many close calls like this major tornado that occurred just 3 miles south of Dodge City, Kansas.

Twin tornadoes are seen near Dodge City, Kansas, with Dodge City Raceway Park in the foreground on Tuesday, May 24, 2016. (Instagram/bradguay)

Various reports point out that 2016 produced the highest severe weather-related losses since 2011, but along with the lower tornado count, 2016 also produced hail reports below the 11-year average. As a matter of a different kind of luck however, these hail events targeted several populated regions across the state of Texas which produced most of the 2016 severe weather-related loss. The overall good news is that hail events across the other states were at or below average.Flood
It is easy to highlight devastating 2016 U.S. flood events, but given the current flood take-up rates, these events were mostly uninsured. But the good news is the federal government and uninsured homeowners and business are taking steps to protect themselves from future flood events. And there’s more positive 2016 flood news: Since 1965, 60% of U.S. measured locations have seen a decrease in flood magnitudes according to the newest EPA study. Finally, no significant trend in major flood events seems to be emerging when looking at historical major flood events as defined by FEMA.

Named Tropical Storms
On average, 87 named tropical storms occur worldwide in any given year. 2016 saw 79 tropical storms, and just 42 were hurricanes (which is again below the average of 48). It should also be noted that so far for the 2016/2017 Southern Hemisphere named storm season (starts July 1), only 2 named storms and 0 hurricanes have formed to date (an average of eight named storms and four hurricanes occur at this point in the season), which equates one of the slowest starts to that basin in history.
However, what the insurance industry cares most about is landfalls, and in 2016 global landfalls were spot-on average: 14 hurricane-force storms made landfall, and five of them were major. Two of those 14 hurricane-force storms impacted the U.S. coastline: Hermine and Matthew both produced isolated impacts that could have resulted in much worse impacts for the insurance industry (considering that one cat modelling company estimates the average annual loss for U.S. hurricane is $15B). The modelling company’s average annual loss number might seem high due to the lucky streak the US has experienced in recent decades: a continued record period without a major hurricane making US landfall.

Image created by Roger Pielke Jr. who has been keeping track of the days between major hurricane landfalls.

Undoubtedly there will always be major catastrophes in any given year, and the media will focus on these events. Undoubtedly some insurance and reinsurance companies suffered in 2016. But all in all, 2016 was a great year and could have been much worse for many more organizations within the insurance industry if the trends mentioned above were reversed. 2017 could likely change the trend of these natural perils which is why it’s best to understand exposures to all natural catastrophes.

For other great news in 2016, check out this tweet string by astronaut Chris Hadfield:

With celebrity death and elections taking the media by the nose, it’s easy to forget that this year saw a great many positives. Let’s look.